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Are you looking to build your wealth in your early twenties? If so, you will enjoy reading this week’s interview with Will. Will blogs at First Quarter Finance which is about building wealth ASAP! He started FQF because he wanted to create a resource for young people who want to make money early in life. He uses his personal past and present experiences to give tested advice for building wealth early in life. He does this by telling his story of how he began investing at age ten.

He states:

“Combining early investing with a healthy income and a frugal lifestyle and… magic happens. Haha. That sounds corny but it’s true.”

If you want to see exactly what he is doing or even emulate it, visit FQF.

Let’s learn how Will has managed his financial life so he will be able to retire at an early age:

What event lead you to realize you needed to simplify your finances?

I watch this PBS documentary about the high cost of managed investments. I decided after watching to stop buying managed funds and go with the E/R index mutual funds offered at Vanguard.

What area of your financial life needed the most simplification?

My investments. Hollywood makes it seem like investors should take crazy risks and constantly be screaming and yelling. I decided to stop the buy and sell, scream and yell nonsense. Turns out I’m actually making more money with my simplified approach. Warren Buffett may be onto something…

When did you begin to simplify your financial life?

I was 23 years young when I decided things needed to be simpler.

What was your biggest challenge or roadblock when it came simplifying?

Having to bite the bullet and sell my American Funds!!! I already paid massive front-end load fees. I felt like I already paid to join the club and now I was foolishly giving away my membership by selling. I finally sold all those funds and lost the approximately $4,000 I paid in loads over the years. Ouch. Oh well, it needed to be done. Front-end loads aside, the expense ratios were so high I needed to get out.

How did you overcome this challenge or roadblock?

I did the math on how much more I would make if I switched to low cost investments. Over the long term, selling my American Funds made sense. It’s hard to argue with math.

How has simplifying changed your life?

My investments are now on auto-pilot. I couldn’t be happier with them. I’ve also simplified my life by riding a bike more often than I drive. I also stopped buying empty calories. When you think about it, those cookies won’t help you out one bit.

How long did it take you to simplify?

I’ve taken a pretty simple approach to my finances my entire life. I’ve never had to make any major corrections except with my investments. However, simplifying my food budget took years. I began with giving up soda. Then I stopped buying bread and made baked at home instead. Eventually I stopped buying heavily processed foods.

Today is May 28, 2015 and I’m proud to say I’ve only had one unhealthy item all year. It was a sucker my adorable 6-year-old cousin begged me to eat after telling me, ‘It’s the best food in the entire world!’ It was a green Blow Pop. It was not good.

How much of your personal finances have you automated?

I automate AS MUCH AS POSSIBLE. Life is too short to slave over paying bills. Heck, even Dave Ramsey promotes automating your finances.
Everything is automated except my invoicing to my freelance writing clients. Maybe I could get something going there… I do use Quickbooks…

What do you automate?

Bills, dollar-cost-averaging my investments, I even use Digit for my savings.

What advice or tips would you give to others who want to simplify their finances?

Use the rule of first principles. Elon Musk said it best:

“I think it’s important to reason from first principles rather than by analogy. The normal way we conduct our lives is we reason by analogy. [With analogy] we are doing this because it’s like something else that was done, or it is like what other people are doing. [With first principles] you boil things down to the most fundamental truths…and then reason up from there.”

We should not live our lives based on what we witness around us. Just because your coworkers eat out for lunch doesn’t mean you have to as well. Just because your coworkers drive fancy cars to work doesn’t mean you have to as well. Just because most people are in debt, it doesn’t mean you have to be as well.

What book, blog, or podcast would you suggest to someone who is looking to simplify or improve their finances?

Well, the site you’re reading this on is a pretty great resource! I’m partial to my own blog as well, First Quarter Finance. Other than those two obvious answers, I recommend people read A LOT of books. I’m always reading at least one personal finance/self-improvement/business book. Doing this is opening up my brain to even more than what I learned in college.

I hate to use this because it’s such a cliché but I recommend you read The Millionaire Next Door. It will cleanse you from the Hollywood millionaire BS you’ve already been exposed to in ample quantities.

If money was not a concern, what would you do for fun?

My life would not look much different. Heck, I still drive the same car I got when I was 16. I’m now 25 and have hundreds of thousands more dollars than I did back then. I’m a sucker for sports cars so I suppose I would have one or two more.

What’s your best savings tip?

Don’t do anything just for the sake of saving money. Life is too short for that. You need to have a greater reason for doing something other than saving money. I bike to work because it’s healthy (and saves money). I drive an older car because I love 90s sports cars (and it’s cheaper than a new Porsche 911). I cook at home because I don’t like the low quality ingredients and hidden calories served at most restaurants (and I can eat steak at home for what I could pay for a paper thin burger at a fancy restaurant).
It’s hard to be motivated by saving money alone. Think bigger.

Are there any areas of your finances that you still need to simplify?

I still have things to sell on eBay and Craigslist from my younger years. Most of the items are listed, they just need to sell. I hate owning things I don’t use. I can’t stand the waste.

Will appreciate you sharing your story with us today. You offered some great advice on how to simplify your finances as well as your life.

If you are interested in sharing how you have simplified your financial life, send me an email and I will follow up with you. Enjoy the rest of your week. Til next time, take one step at a time to simplify.

You are probably wondering how can my 401(k) possibly help me simplify my finances? Investopedia defines a 401(k) as a qualified plan established by employers to which eligible employees may make salary deferral (salary reduction) contributions on a post-tax and/or pretax basis. Employers offering a 401(k) plan may make matching or non-elective contributions to the plan on behalf of eligible employees and may also add a profit-sharing feature to the plan. Earnings accrue on a tax-deferred basis. Most companies offer 401Ks or some form of retirement account which you can take advantage of to help you simplify your finances.

So enough with the details of a 401(k), how will it help me simplify my finances. Here are five ways a 401(k) can help you simplify:

Forced savings – When you sign up for your company’s plan, your contributions are taken directly from your pay check. You do not have to set up automated transfers to your savings account to save. Its already done for you. All you have to do is sign up and determine what percentage of your income you would like to save. Can’t get any easier than that. Having a 401(k) forces you to save and its a little bit more difficult to to stop the contribution. You can but not as easy as when you don’t control the transfers. You can’t tell yourself I forgot to make the transfer this month.

Free money – Who does not like free money? Many companies will match your contributions to your 401(k) which means more money for you. Having more money in the future will absolutely help simplify your finances. Here is the best part assuming you invest the money in a mutual fund the money the company contributes will be worth more than when they made the contribution when its time for you to retire.

Can reduce current taxes – Because your contributions to your 401(k) are pre-tax it will reduce your current annual income. Therefore it reduces your current tax liability. Who would not want to pay less in taxes? Check with your tax preparer to help determine how much you should contribute and how much of a tax benefit it will be.

Has limited investment choices - Yes limited investment choices can help you simplify your finances. I know when I have too many choices I tend to make slower decisions which delays the process. Also if this is your first introduction to investing you may be overwhelmed with too many choices. This can sometimes result in no action at all. Having limited choices makes it easier on you to make a decisions and not delay the process of investing your money.

Some offer target date funds – many 401(k) plans offer targeted funds. Targeted funds is a mutual fund that automatically adjust the asset allocation mix in the fund according to your expected retirement date. For example if you anticipate retiring in 30 years your initial allocation will be more aggressive with mainly stock funds as you get closer to your retirement date the allocation will automatically shift from a growth to a more conservative allocation which will have more bond funds to reduce risk and generate more income. Having these funds as a choice makes it easier on you because you do not need to make adjustment to your allocation it is done for you. That is one less thing you have to worry about. This post can help you with your 401k choices.

You didn’t think it was possible but it can happen. Your 401(k) can help you simplify your finances. So now take action by either contributing to your 401(k) or reviewing your existing 401(k) to make sure you are taking full advantage of the benefits. Til next time take one step at a time to simplify your finances.